Bank v. 288/59 Gp LLC
| Decision Date | 04 January 2011 |
| Docket Number | Civil Action H-09-4099 |
| Parties | Compass Bank, Plaintiff, v. 288/59 GP LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court is plaintiff's motion for summary judgment (Dkt. 38) and plaintiff's motion to strike portions of defendants' summary judgment exhibits (Dkt. 44). After review of the motions, the responses, the replies, and the applicable law, the court is of the view that plaintiff's motion for summary judgment be GRANTED, and that the motion to strike be GRANTED for the reasons stated below.
Plaintiff Compass Bank, as the successor in interest to Texas State Bank, brought this lawsuit for breach of contract seeking to enforce the terms of six guaranties executed by defendants Brownlee, Burgher and Butler with respect to: (1) two promissory notes executed by Rosenberg 59, LP in the amounts of $6,000, 000.00 and $1,829, 065.00, respectively; and (2) a promissory note executed by 288/59 II, LTD in the principal amount of $7,411, 522.00. While the suit was pending, Compass Bank foreclosed on the subject properties, and was the successful bidder at auction with respect to each of those properties on May 4, 2010. The parties agree that the sale price of each property was far less than the amounts due under the notes. Compass Bank now seeks to recoverthe deficiency between the amounts owed on the respective notes, and the amounts credited for the sales prices of the subject properties.
Compass Bank filed a motion for summary judgment seeking to recover the post-foreclosure deficiencies pursuant to the terms of the guaranties executed by defendants, and argues therein that defendants' proposed defense seeking to challenge the reasonableness of the sales prices of the properties in foreclosure has been waived. Dkt. 39. Defendants oppose summary judgment, and assert that they are entitled to interpose an affirmative defense, in one fashion or another, premised upon their evidence that the sale price of the subject properties did not approach the fair market value of those properties at the time of the sale. Dkt. 40. Defendants also seek to present their own affidavits concerning their lack of knowledge that they were waiving their right to offset when they signed the guaranties. Id. Compass Bank moves to strike defendants' evidence with respect to fair market value and the parol evidence concerning defendant's understanding of the terms of the guarantees. Dkt. 44.
A timely motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Carrizales v. State Farm Lloyds, 518 F.3d 343, 345 (5th Cir. 2008). Ultimately, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348 (1986). An issue is "material" if its resolution could affect the outcome of the action. Burrell v. Dr. Pepper/Seven Up Bottling Grp., Inc., 482 F.3d 408, 411 (5th Cir.2007). "[A]nd a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party." Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006).
The moving party bears the initial burden of informing the court of all evidence demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548 (1986). Only when the moving party has discharged this initial burden does the burden shift to the non-moving party to demonstrate that there is a genuine issue of material fact. Id. at 322. If the moving party fails to meet this burden, then it is not entitled to a summary judgment, and no defense to the motion is required. Id.
"For any matter on which the non-movant would bear the burden of proof at trial..., the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial." Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 718-19 (5th Cir. 1995); Celotex, 477 U.S. at 323-25. To prevent summary judgment, "the non-moving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., 475 U.S. at 587 (quoting Fed. R. Civ. P. 56(e)).
When considering a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org. v. City of Dallas, Tex., 529 F.3d 519, 524 (5th Cir. 2008). The court must review all of the evidence in the record, but make no credibility determinations or weigh any evidence; disregard all evidence favorable to the moving party that the jury is not required to believe; and give credence to the evidence favoring the non-moving party as well as to the evidence supporting the moving party that is uncontradicted and unimpeached. Moore v. Willis Ind. Sch. Dist., 233 F.3d 871, 874 (5th Cir. 2000).
A plaintiff seeking to enforce a guaranty must prove: "(1) the existence and ownership of the guaranty agreement; (2) the terms of the underlying contract by the holder; (3) the occurrence of the conditions upon which liability is based; and (4) the failure or refusal to perform the promise by the guarantor." Byrd v. Estate of Nelms, 154 S.W.3d 149, 157 (Tex. App.-Waco 2004, pet. denied). Courts enforce guaranties according to their terms when those terms are clear and unambiguous. Texas Nat. Bank v. Johnson, 11 F.3d 1260, 1266 (5th Cir. 1994). Defendants do not contest that these elements have been met in this case. Rather, the dispute centers upon the foreclosure sales that occurred after defendants failed to perform under the guaranties.
When a foreclosure sale occurs in the context of enforcement of a guaranty, Texas law provides that the remaining loan deficiency be computed by subtracting the sales price of the property from the then-existing loan balance. Tex.Prop.Code Ann. §51.003(a). Defendants argue that they are entitled to an offset on the amount of any deficiency judgment for any difference between the price paid in foreclosure for the properties sold to satisfy the guaranties, and the true market value of those properties. Indeed, Texas law provides that any person against whom a deficiency is sought is entitled to a credit for the difference between the amount of the liens against the property and the fair market value of the property as of the date of the foreclosure sale. Tex. Prop.Code Ann. § 51.003(b). The offset contained in Section 51.003 applies to guarantors. LaSalle Bank N.A. v. Sleutel, 289 F.3d 837, 840 (5th Cir. 2002) (citing Long v. NCNB-Texas Nat. Bank, 882 S.W.2d 861 (Tex.App.-Corpus Christi 1994)). However, the separate guaranty agreements in this case contain an express waiver of defendants' rights "to interpose against [plaintiff] any setoff or counterclaim of any nature or description, whether of Borrower or Guarantor, in the computation ofany amounts payable by Guarantor hereunder or in any litigation arising out of or relating to this guaranty...." Dkts. 39-5, 39-7, 39-10, 39-12. The Fifth Circuit, anticipating Texas law, has held that such contractual waivers will be given effect. LaSalle Bank N.A., 289 F.3d at 840. The ruling in LaSalle Bank is binding on this court, and, accordingly, this court finds that defendants waived their rights to offset under Section 51.003 with respect to the guaranties and properties at issue.
Defendants argue that plaintiff failed to plead the contractual waiver in the complaint, and that plaintiff has, in effect, waived its ability to assert defendants' waiver of the right to offset. The court disagrees. Plaintiff pled all necessary elements of its claims by alleging the existence of the guaranties, breach thereof, and the existence of deficiencies after the sale of the properties. Byrd, supra. The offset available under Section 51.003(b) is an affirmative defense to plaintiffs claims. Plaintiff was under no duty to include in its complaint any allegations in anticipation of that affirmative defense. "The pleading requirements in the Federal Rules of Civil Procedure, however, do not compel a litigant to anticipate potential affirmative defenses... and to affirmatively plead facts in avoidance of such defenses." Abbas v. Dixon, 480 F.3d 636, 640 (2d Cir. 2007).
Defendants make two other arguments with respect to the contractual waiver of the right to offset. First, they assert that they were unaware that they were waiving their right to offset by signing the guaranties. Dkt. 40 at 5. However, the language in the guaranty agreements is clear and unambiguous. Defendants agreed to waive "any setoff or counterclaim of any nature or description" concerning amounts owed under the guaranties. Dkts. 39-5, 39-7, 39-10, 39-12. "An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating an ambiguity or to give the contract a meaning different from that which its language imports." David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008). Defendants' affidavitsconcerning their understanding (or lack thereof) of the waiver provision are inadmissible, and cannot create ambiguity where none is apparent on the face of the documents.
Second, defendants assert they had no choice but to agree to the waiver provisions in the guaranties, and that they would have been forced to file for bankruptcy had they not executed those...
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